So, you live off your credit cards. You spend more than you make. For you, debt is lurking around every corner. Finally, it happens: you can’t make your monthly payments. Your debt becomes defaulted.

Now what?

What is a Default?
A default on your debt happens as soon you miss a payment, yes, even just one payment. As soon as this happens, creditors may start the collection process.

What Will Creditors Do?
A creditor will take many steps to try and collect the debt from you. To begin, they will try to “dun” you for your money. “Dun” simply means that they will try to convince you to pay, either nicely or through threats. They can “dun” you in a variety of ways: through email, through phone calls, through faxes, or through standard mail. They may start out being friendly and get more aggressive as time goes by. But, no matter what they say or do, by law all they can do is ask you to pay.

What Can You Do?
You can ignore the creditors or you can respond. You may dispute the debt or work out a settlement or payment plan. Some creditors have more leverage than others. For instance, a electricity company can turn off your electricity if you refuse to pay. This leaves you with little choice than to bite the bullet.

When do Bill Collectors Move in?
If you ignore the creditor, they may hire a collection agency to pursue you further. They may also report your delinquency to the credit bureau.

The collection agency will take up where the creditor left off: they will write letters, call you, or email you for payment. Some collection agencies may pursue you endlessly, others may give up after one or two tries. It mostly comes down to the amount of money you owe, the aggressiveness of the collector, and the collectability of the debt. Just like creditors, collection agencies can only ask you to pay: they can’t camp out in front of your house and protect. However, they are often more aggressive and more threatening than the average creditor.

What if you Refuse to Pay?
If you refuse to pay the debt owed, the collection agency may turn the debt back over to your creditor. Your creditor then has a few options. They can report your unpaid debt to a credit bureau, which will greatly hurt your credit and could prevent you from getting a house, a car, or even a job. The creditor can also hire an attorney. Just like the collection agency, the attorney will try to get you to pay, but, unlike the collection agency, if you don’t, the attorney may be authorized to file a lawsuit. Usually, law suits are only filed for large debts. They are rarely filed for debt less than one thousand dollars.

How is a Judgment Obtained?
After a lawsuit is filed, a judgment is issued against you. This judgment provides creditors leverage. They can use it to garnish your wages, which can be financially devastating, or they can repossess certain properties. Judgments are generally very expensive for you, as you are forced to pay attorney fees, interest, and court costs. A judgment can also virtually ruin your credit. For these reasons, if a judgment is going to be issued against you, it’s very wise to hire - or at least speak with - an attorney.

Paying off your debt may be the last thing you want to do, but, as demonstrated above, it’s better to take some action - either by challenging the debt, negotiating the debt, or paying the debt - than it is to do nothing. If you can’t pay the debt in full, and are uncomfortable negotiating by yourself, there are professional services, such as debt management and debt settlement companies, that can help you.